W. Va. Code R. § 110-21-20

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-21-20 - Credit For Income Tax Of Another State

20.1. General. - A West Virginia resident may be allowed a credit against his West Virginia personal income tax for any personal income tax imposed for the taxable year by another state of the United States or the District of Columbia, upon income derived from sources within the other state or the District. Where a resident estate or trust receives income from another state of the United States or the District of Columbia, then the estate or trust is entitled to a similar credit, computed in the same manner and subject to the same exceptions and limitations as in the case of a resident individual. No credit, however, shall be allowed for personal income taxes imposed by a county, municipality, borough, township or any other political subdivision of a state or for any taxes other than personal income taxes.

20.1.1. The amount of the credit allowed under W. Va. Code '11-21-20(a) and Subsection 20.1 above shall be determined in accordance with forms and instructions provided by the Tax Commissioner.

20.1.1.1. The Tax Commissioner may by instruction or otherwise require any resident individual, estate or trust to provide evidence, including but not limited to, a copy of the completed and signed nonresident personal income tax return filed with the other taxing jurisdiction for the taxable year, in order to establish that the individual, estate or trust is entitled to claim a credit under the provisions of W. Va. Code '11-21-20.

20.1.1.1.a. No credit shall be allowed under W. Va. Code '11-21-20 unless the taxpayer has proved to the satisfaction of the Tax Commissioner the amount of tax paid to the other taxing jurisdiction. A Form W-2 indicating personal income tax withheld for another jurisdiction shall not be sufficient to establish credit under this Section. The mere fact that tax was withheld does not establish the fact that the taxpayer has been liable for the payment of tax to another jurisdiction. Therefore, when claiming a credit for taxes paid to another jurisdiction, the taxpayer must file with his West Virginia Personal Income Tax Return a signed copy of the personal income tax return filed with the other jurisdiction. Such return shall be considered as prima facie evidence of the amount of personal income tax, if any, paid to the jurisdiction.

20.2. Limitation. - The amount of the credit allowed to a resident individual is subject to the following limitations:

(1) The credit allowed shall not exceed the amount of tax actually payable to the other jurisdiction on income also subject to West Virginia tax.

(2) The credit shall not exceed the percentage of the West Virginia personal income tax determined by dividing the portion of the taxpayer's West Virginia income subject to taxation in such other jurisdiction by the total amount of the taxpayer's West Virginia income. For example, if the total income of a resident was five thousand dollars ($5,000) and two thousand dollars ($2,000) thereof was subject to tax by another jurisdiction, the amount of the West Virginia tax credit would be limited to forty percent (40%) ($2,000 divided by $5,000) of the West Virginia tax.

(3) The credit shall not reduce the West Virginia personal income tax otherwise due to an amount less than would have been due if the income subject to taxation by the other jurisdiction were excluded from the taxpayer's West Virginia income. If in the example above, the West Virginia personal income tax would have been twenty dollars ($20) less by eliminating the other jurisdiction's income from the income subject to West Virginia personal income tax, the credit shall be limited to twenty dollars ($20).

20.3. Exception. - Where there exists a written reciprocal credit agreement between West Virginia and another taxing jurisdiction as authorized under the provisions of W. Va. Code '11-21-40, no credit shall be allowed for a tax levied by such other jurisdiction against personal income taxes imposed by this State.

20.3.1. The resident credit allowed under W. Va. Code '11-21-20(a) and Subsection 20.1 of this regulation is only applicable where another taxing jurisdiction has not by written agreement with this State consented to grant nonresidents a credit for personal income taxes imposed by the state of residence. In such cases, the taxpayer must look to West Virginia for the applicable credit and must claim the credit on the West Virginia Personal Income Tax Return.

20.3.1.1. Example. - X, a resident West Virginia taxpayer, earns income in Virginia during the taxable year. Presuming this State and Virginia are operating under a written reciprocal credit agreement whereby Virginia grants nonresidents a credit for personal income tax imposed by the state of residence on the income earned in Virginia, this taxpayer who receives a credit by Virginia on his nonresident Virginia return for West Virginia personal income taxes paid is not entitled to a credit on his West Virginia resident return for personal income tax imposed by Virginia.

20.4. Definitions. - For purposes of W. Va. Code '11-21-20 and this regulation, the terms and phrases set forth below shall have the following meaning.

20.4.1. "West Virginia income" means the West Virginia adjusted gross income of an individual or the amount of the income of an estate or trust determined as if the estate or trust were an individual computing his West Virginia adjusted gross income as described in Section 12 of these regulations.

20.4.2. "West Virginia tax" means the total tax payable on the West Virginia taxable income of the resident individual under the West Virginia Personal Income Tax Act excluding any amounts representing penalties or interests.

20.4.3. "Tax of the other jurisdiction" means the total tax imposed for the taxable year by a state of the United States other than West Virginia or by the District of Columbia as provided under Subsection 20.1 of this regulation, exclusive of any penalty or interest.

20.4.4. "Income derived from sources within" means compensation for personal services performed in the other jurisdiction, income from a business, trade or profession carried on in the other jurisdiction and income from the ownership of real or tangible personal property situated in the other jurisdiction but not income from intangibles, except where such income is from property employed in a business, trade or profession carried on in the other jurisdiction.

W. Va. Code R. § 110-21-20